Shares of the companies that make everything from Cheerios and Pepsi-Cola to Pampers disposable diapers have been a defensive play for investors in uncertain times. But the companies have been struggling with weak demand in North America and Europe, cooling emerging markets and increasingly fickle consumers empowered by social media and online search and comparison tools.

Investors flocked to packaged food stocks last year, hoping to benefit from dividend increases and potential takeovers following the purchase of H.J. Heinz. Now they have begun to trade out, making consumer staples the worst-performing sector over the past six months.

Analysts warn their shares could sink further.

During the last five years, the Standard & Poor’s 1200 Consumer Staples index had a total return of 117 percent, ranking sixth out of the 10 sectors measured. Over the past six months its return has been the worst of the 10, down 0.55 percent.

“You’re going back to the fundamentals now, which really are pretty abysmal,” said Wells Fargo food analyst John Baumgartner. He and others said there may be room for further declines. “The stocks still aren’t cheap.”

Helped by predictable, strong cash flow and generous dividends, the 25 biggest consumer staples firms still trade at 18 times forward earnings estimates, according to Thomson Reuters data. That’s not far from the 20 multiple enjoyed by the fast-growing technology stocks.

COST-CUTS 2.0

Big names including Nestle S.A. NESN.VX, Unilever PLC (ULVR.L) and Procter & Gamble Co (PG.N) all have shed under-performing food brands, including PowerBar, Skippy peanut butter and Pringles, respectively. But for most companies in the space, perennial efforts to remake themselves through acquisitions, divestitures or new product development have not moved the needle dramatically.

Several executives presenting at this week’s Consumer Analyst Group of New York (CAGNY) conference in Boca Raton, Florida, served up familiar strategies that bolster short-term profits without boosting sales. Investors at the conference have been pressing for bolder steps like divestitures of underperforming units and purchases of smaller, faster-growing rivals.

“A big theme here is companies going back to their core. But is the core still relevant?” asked Andrew Cosgrove, lead analyst on Ernst & Young’s global consumer team. “The world has moved on.”

Cadbury chocolate and Oreo cookie maker Mondelez International Inc (MDLZ.O), grappling with skimpy returns since its split from Kraft, outlined a plan to boost margins after billionaire activist investor Nelson Peltz joined its board and a new activist investor, Jana Partners, announced a stake.

CEO Irene Rosenfeld said her strategy included adopting the same stringent budgeting style favored by the Brazilian owners of Heinz, who are notorious for their cost-cutting.

Procter & Gamble, maker of Tide and Pampers, laid out plans to restructure operations and redesign its North America supply chain to save money.

“Everyone’s talking about the same thing. There seems to be an even greater focus than usual on productivity and cost-savings,” said Kevin Dreyer, a portfolio manager at Gabelli Funds LLC.

CAN THE CENTER HOLD?

Though Peltz did not attend the conference in the balmy beach town of Boca Raton, he stole the show with a renewed call for PepsiCo PEP.N to separate its lackluster beverage business and its flourishing snacks division into “two leaner and more entrepreneurial companies.”

PepsiCo executives stuck by their view that the two businesses are better together.

To that same end, Kellogg Co (K.N) said its No. 1 priority in 2014 is to revive growth in its mainstay cereal business that has lost ground to frozen breakfast sandwiches, Greek yogurt and smoothies. That double-down follows its own forays into other breakfast categories like protein bars and shakes.

“When we talk about winning in breakfast it doesn’t mean we’re going to go into frozen bagels or orange juice or coffee, we’re going to win in breakfast with cereal,” Kellogg Chief Executive John Bryant said.

Analysts and investors pressed executives to explain why doing much of the same thing would yield different enough results to justify the sector’s premium valuation.

“I think I have heard Campbell Soup talk about premium soup probably, I don’t know, 10 different launches. Every single one has failed. So why is this move going to be successful?”

Campbell CEO Denise Morrison told Katzman that premium soup is a relatively new segment. The company now sells a range of fresh, organic and ethnic-influenced soups in different packages in addition to its iconic red and white cans.

In an interview with Reuters, she added, “we believe we’re building a very robust platform for the next generation of consumers that will be meaningful.”

Coca-Cola Co (KO.N) announced another dividend increase and a cost-savings funded $400 million incremental increase to its marketing arsenal after 2013 sales fell short of internal targets.

Some analysts said Coke’s need to significantly increase spending to hit its goal underscores the lackluster growth in the sector, dominated by behemoths with annual sales that exceed the gross domestic product of many small nations.

The world’s biggest soft drink maker recently invested $1.25 billion in Green Mountain and signed a deal to sell Coke-owned beverages on the smaller company’s upcoming at-home cold drink machine. Several analysts said they would like to see Coke buy Green Mountain outright, which would diversify Coke away from sugary sodas that are struggling in key North American markets.

On the other hand, Dean Foods Co (DF.N) spin-out WhiteWave is aggressively expanding its portfolio, introducing “milks” made from almonds, coconut and oats, as well as new organic snacks that address consumers’ growing appetite for products they deem “cleaner” and healthier.

Gregg Engles, WhiteWave’s CEO, cautioned that business as usual could be a burden for big consumer companies when consumer tastes and demographics are rapidly shifting.

“In this industry as in many other industries, often changes can be abrupt and disruptive,” he said.